The Need for Outsourcing

The first and foremost reason why companies outsource their processes is the significant and even massive cost reduction that results from outsourcing jobs, processes, businesses etc.

What is Outsourcing?


Outsourcing as we know is the process of contracting out certain non-essential or non-core processes of a company to a third-party with proven expertise in the field. Outsourcing is similar to Offsourcing but the two also differ on certain grounds. Offsourcing basically refers to contracting out certain or even most of the services or tasks to a company or companies located in another country (India, China, Mexico etc) whereas outsourcing may or may not involve Offsourcing. So in that case outsourcing is a more general term whereas Offsourcing is more specific.

The Need for Outsourcing:

The first and foremost reason why companies outsource their processes is the significant and even massive cost reduction that results from outsourcing jobs, processes, businesses etc. But why is it so? Well, outsourcing lets a company to focus on their core expertise like IT, Hotels, Health etc while letting people manage other peripheral (not necessary services nonetheless) services like data entry, employee database, housekeeping, customer support and so on. Such Offsourcing allows the company to turn fixed costs into variable ones, reduces the burden of managing a large workforce and extending them the various company benefits. In fact most of the top companies prefer low-cost destinations like India for their outsourcing needs, whether BPO or other, as they can cut back on a lot of overheads like worker benefits, maximum working hours etc.

Apart from this Business Process Outsourcing (BPO) and other outsourced processes is an opportunity to get a foot hold in any new country by making new clients (in the form of service providers), setting up new business offices, understanding the domestic market and so on.

Outsourcing Types and Process:

Outsourcing or Offsourcing is not a straightforward or unidimensional phenomenon rather it can be of different types and comprises several interrelated steps and events.

Business Process Outsourcing (BPO):

As the name itself suggests in BPO the non-core business like data backup, maintenance may be outsourced. In fact companies looking to work on a frugal budget and within strict deadlines may even outsource their complete processes like product design, software coding, testing and maybe even marketing and sales.

Knowledge Process Outsourcing (KPO):

KPO is a relatively new process evolved to outsource knowledge-related work to third party service providers who are specialised and especially trained in this field. This may involve customer support including voice and technical, providing logistical support, answering customer queries, providing answers to specific queries from domain experts and so on.

Finance and Accounts Outsourcing:

This involves off shoring or outsourcing the financial aspects of a company including account keeping and auditing to professional service providers within or outside one's country.

This list is not exhaustive rather only exploratory in order to scan the vast outsourcing industry, which has developed over a relatively short span of time. Current figures peg the global outsourcing industry to be worth US $20 billion and growing largely due to the quick growth of developing economies like India and China that have a vast resource of talented, young, energetic, flexible and relatively cheaper manpower who are willing to put in hard labour and work according to the client country's work hours.

In fact Continuous Development is one of the greatest benefits offered by Offsourcing. This simply means that the development team in the parent country, say UK, can work all day and in the night while they sleep in the night the offsourced team in India picks up on the development task, making it continuous making possible faster delivery times and 24/7 support.

Outsourcing Facts, Figures and Statistics:

Apart from the fact that the outsourcing industry is worth US $20 billion and growing it is worth noting the various major sectors that make up the Offsourcing industry. The break up of various sectors is as follows:

  • IT-28%
  • Human Resources- 16%
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